German Jobless Rate Hits 10.5%; Damage to Kohl Likely : Europe: Public says employment is a major issue in the run-up to fall elections. Many economists deplore high labor costs, low productivity.

BONN — German unemployment rose to a postwar record of 4.04 million in February, climbing toward the jobless levels that helped bring Nazi dictator Adolf Hitler to power in 1933.

The Federal Labor Office announcement Tuesday of a 10.5% jobless rate bodes poorly for Chancellor Helmut Kohl and his center-right Christian Democratic Union in this year of 19 state and federal elections.

The country will vote for a new Parliament and chancellor in October.

Germans have identified unemployment as the top election issue in recent polls that also show Kohl fighting for political survival. His party, which rules in a coalition with the Free Democratic Party, is losing ground to the left-of-center Social Democratic Party.

"All the basic indicators in Germany are pointing upward. The economic situation will generally improve in 1994, despite high unemployment," Waigel said.

Some economists agree, although the Economics Ministry released data Tuesday showing that western Germany's economy actually shrank in the last quarter of 1993. Previously, the government had said it was flat. The ministry said the region's gross domestic product fell 0.5% from the previous quarter and 0.9% from a year earlier.

Kurt Volger-Ludwig, head of labor and social politics at the IFO Institute for Economic Research in Munich, noted that joblessness is always higher in winter and said unemployment is not likely to worsen in 1994.

But many economists emphasize that Germany's unemployment problem is structural, and they warn that more companies will send more jobs abroad if labor costs do not come down and industry does not become more competitive.

German wages have been rising faster than those of other major industrial nations and nearly twice as fast as Germany's own industrial output. From 1985 through October, 1993, unionized workers' real hourly wages grew 23%, compared to a 12% growth in industrial output, according to the Federal Statistics Office. By contrast, real wages in the United States declined 8.5% in the same period.

German industry has been resisting unions' wage demands in the last year, setting off a wave of warning strikes and a vote to strike by IG Metall, the union of engineering workers, in Lower Saxony last week.

The strike--which would have been the first major walkout in western German industry in 10 years--was averted at the last minute when the union effectively agreed to a pay freeze for 3.6 million engineering workers. IG Metall leader Klaus Zwickel said the union had traded "job security against money."

The agreement was seen as a signal to the country's 3.5 million public sector workers, who have launched a series of warning strikes for wage negotiations scheduled to begin today.

The figures released Tuesday showed that unemployment rose in western Germany to 8.9% of the work force in February from 8.8% in January. In eastern Germany, the rate was 17.1% compared to 17% in January.

Eastern German voters naturally express the most concern about unemployment in election polls. And eastern Germany, which Kohl helped to reunite with the west, could be the decisive factor in ousting the western chancellor after 12 years in office.